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💰 Broadcom's $10B AI Deal
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Market Performance
S&P 500: 6,502.08 ⬆️ 0.83% (new record close)
Nasdaq: 21,707.69 ⬆️ 0.98%
Dow Jones: 45,621.29 ⬆️ 0.77%
Broadcom Secures $10 Billion AI Chip Order
Broadcom (AVGO) crushed earnings expectations and delivered a massive surprise that sent shockwaves through the AI chip market.
The semiconductor giant not only beat Q3 estimates with $1.69 EPS versus $1.65 expected, but CEO Hock Tan dropped a bombshell 👇
Broadcom secured $10 billion in orders from a fourth major customer for its custom AI chips.
The company's custom processors, called XPUs, are designed for tech giants like Google, who want specialized chips rather than off-the-shelf solutions.
With AI revenue jumping 63% to $5.2 billion and expected to reach $6.2 billion next quarter, Broadcom is demonstrating that diversification in the AI chip market is a reality.
The $10 billion order represents a key milestone for Broadcom's custom silicon strategy.
As Tan noted, "We will ship pretty strongly beginning 2026," suggesting this massive order will fuel growth well into next year.
Broadcom is a mega-cap tech stock and has a Ziggma score of 88. However, it ranks in the bottom percentile in terms of valuation.
Our Takeaway
Broadcom's $10 billion AI chip win proves the market for custom processors is exploding.
This validates our thesis that AI infrastructure spending will benefit multiple players, not just Nvidia.
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Market Overview
The S&P 500 hit its 21st record close of 2025 as investors digested mixed labor market signals that reinforced expectations for a September Fed rate cut.
The ADP private payrolls report showed only 54,000 jobs added in August, well below the 75,000 expected, while jobless claims rose to 237,000. Paradoxically, this weakness was exactly what markets wanted to see.
Traders reasoned the data was soft enough to justify Fed easing without signaling recession fears. Fed funds futures now show a 97% chance of a rate cut on September 17th.
Treasury yields dropped across the curve, with the 30-year falling from Wednesday's brief foray above 5%.
The ISM non-manufacturing PMI provided some balance, coming in at 52.0 versus the expected 50.8, suggesting resilience in the services sector.
All eyes now turn to Friday's crucial jobs report, where nonfarm payrolls are expected to show 75,000 jobs added.
A number in this range would likely cement Fed dovishness without triggering recession fears.
Stock Moves Deciphered 📈
Elevance Health (ELV) - Declined sharply after cutting its earnings forecast and expressing caution on Medicaid margins.
Insider selling and news of a legal investigation further weighed on shares, fueling investor concerns about the headwinds facing the healthcare sector.
Micron Technology (MU) - Surged on soaring demand for high-bandwidth memory chips driven by the AI boom.
An upgraded outlook and new White House AI education partnership boosted sentiment for the memory giant.
Gap (GAP) - Jumped 6% on reports that Gap and Old Navy brands will start selling cosmetics.
The retailer plans to roll out beauty products this fall, with most items priced under $25, marking a strategic expansion beyond apparel.
Headlines You Can't Miss
📊 ADP private payrolls: Added only 54,000 jobs in August vs 75,000 expected, reinforcing Fed rate cut bets.
📈 Jobless claims: Rose to 237,000 for the week ended Aug 30, up 8,000 from the prior week.
🏛️ Trump tariff appeal: Asks Supreme Court for expedited ruling on overturned tariff decisions worth $750B-$1T.
🛒 American Eagle: Surged 26% after Q2 earnings beat, driven by Sydney Sweeney partnership campaign success.
💻 Hewlett Packard Enterprise: Gained 4% on Q3 earnings beat of 44 cents vs 43 cents expected.
🏗️ ConocoPhillips: Plans to cut up to 25% of workforce as oil prices pressure the energy sector.
₿ Crypto rotation: Bitcoin ETFs see $634M inflows while Ethereum ETFs face $173M outflows this week.
🏠 Homebuilders outperform: SPDR Homebuilders ETF (XHB) and iShares Home Construction (ITB) both gain 2%+.
Trending Stocks
Salesforce (CRM) ⬇️ 4.9%
CRM stock fell despite beating earnings estimates, as its weak revenue forecast disappointed investors.
The cloud company guided Q3 revenue to $10.24-$10.29 billion, versus the expected $10.29 billion.
Concerns grew over the potential slowdown in growth and the delayed monetization of AI investments, despite a strong Q2 performance.
Amazon (AMZN) ⬆️ 4.2%
AMZN stock gained over 4% after its Project Kuiper satellite internet division secured a partnership with JetBlue.
Moreover, Wall Street sees significant revenue opportunities from Anthropic's $40 billion funding round, with the AI startup primarily training on AWS infrastructure.
Halliburton (HAL) ⬆️ 4.1%
The energy giant outperformed its sector peers despite broader pressure in the oil services sector.
The stock benefited from resilient demand and positive momentum in the energy market, signaling potential recovery even as competitors like ConocoPhillips announced major workforce cuts.
What’s Next?
Key Events to Watch 👇
September historically ranks as the worst month for equities, with the S&P 500 averaging 4.2% declines over the past five years.
Friday's jobs report is expected to show an addition of 75,000 nonfarm payrolls.
Over 95% of S&P 500 companies have reported Q2 results, with 78% beating expectations.
Federal officials continue to provide commentary ahead of the September 17 meeting.
The Supreme Court's decision timeline on the Trump tariff appeal could impact trade-sensitive sectors.
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